Bangladesh: IMF loan will increase the burden on the poor, warns EquityBD

The International Monetary Fund (IMF) approved a loan of one billion dollars to Bangladesh after two years of negotiation. The Equity and Justice Working Group (EquityBD), an alliance of right-based civil society organizations, has continuously and consistently protested it. This is the first loan that the Asian country has taken in seven years.

In a statement issued last month, Equity BD urged the government to open public and parliamentary debates on all foreign financial assistance in the name of assistance and development. The coalition noted that the loan was not necessary, because Bangladesh possesses more than nine billion dollars in its reserve.

The coalition warned that the conditionalities imposed by the IMF – such as the increase of the VAT, the automatic adjustment of fuel price, the reduction of subsidies and the deregulation of imports – will enhance further miseries of common people.

The rights group said the latest $1 billion loan from the IMF would not relieve people of their livelihood plight as the loan was tied with a lot of strings which are globally proved as anti-poor conditionality.

The Executive Board of the IMF approved on April 11 a three-year arrangement for Bangladesh under the Extended Credit Facility (ECF) in a total amount equivalent to about USD 987 million. The Board’s decision immediately enabled the initial disbursement of an amount equivalent to about USD 141 million.

According to the press release issued by the IMF, “the ECF arrangement is designed to support the authorities’ program, which aims to restore macroeconomic stability, strengthen the external position, and engender higher, more inclusive growth.”

“As part of the loan agreement, the Bangladeshi authorities agreed to create fiscal space by increasing tax revenues and containing subsidy costs, reinvigorate the financial sector through strengthened governance and oversight, and take other reforms aimed at catalyzing additional resources,” and “catalyze additional resources, in order to boost social – and development – related spending, tackle power shortages and the infrastructure deficit, and stimulate export-oriented investment and job growth,” explained the Fund.

But, according to EquityBD, the conditionalities imposed by the IMF “are being treated as major anti-poor policies in Bangladesh and also in other so-called developing countries.”

The alliance thinks that automatic adjustment of fuel price and imposing VAT will increase the livelihood burden on the poor and their economic plight, and that they would also be harmful to small entrepreneurs, considered as the driving force of the economy.

“It will hamper the growth of local entrepreneurs and thus create a space for the multinational companies to expand their market,” regretted the statement.

EquityBD said the IMF gives emphasis only on VAT in respect of local resource mobilization and it does not advise the government to impose property tax and personal tax as those are related to the rich and elite section of society, and impose tax on MNCs.